E.A.S.E. into Retirement Podcast

with Tom Mosley.  
Episode
65
Could Social Security go BROKE?

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Tom Mosley:

People want to know, could Social Security go broke? I don’t think any politician is going to want to stand in front of anybody in a crowd or on television and say, “You’re not going to get the Social Security that you paid in for all through the years because we did pay in the FICA and it’s not a true entitlement.”

Tom Mosley:

Hey, welcome to the E.A.S.E. Into Retirement Show. I’m Tom Mosley, your host. Today, our topic is could Social Security go broke? There are a lot of questions about that. The Social Security Administration itself is even telling us when they send out the little four-page or they don’t really send it out, you have to get online and get it, but the little four-page report on your Social Security that you can get at www.ssa.gov, that’s www.ssa.gov, well, in that report, they’re even telling us that unless Congress makes some changes, that Social Security will only be able to pay out 79% of the benefit in 2034.

Tom Mosley:

Now, that number changes a little bit from year to year to year, and sometimes it goes to 2033, and sometimes it goes to 75% of the benefit. But that’s why people are concerned, could Social Security go broke? I don’t believe that it’ll ever go broke. That’s a belief, I’m not promising anything, okay? I don’t believe that any politician is going to stand in front of a crowd, or produce a commercial, or run on a platform that, “If you elect me, I will reduce your Social Security.” Because I don’t think they would get reelected. And I think the major purpose of every politician in their own mind is to get reelected. So I don’t believe they will change.

Tom Mosley:

Now, let’s talk about why Social Security might be in a position to maybe be in a little bit of trouble. And we go to the board and I have to go back to the history in 1935 when things started with Social Security versus today. In 1935 when Social Security started, the average life expectancy for an American male was 61 years and eight months. Therefore, if you lived to 62, when you could first get Social Security, you were living on borrowed time. You were older than most people lived.

Tom Mosley:

Now, it’s an average life expectancy from birth up to 83. So Social Security now has to pay out a lot longer. Most people wouldn’t live to collect it back then. People can now live so long that they outlived their other savings and they’re only on Social Security. Social Security was always meant to supplement your retirement not to be an actual retirement plan. And now we’re told that Social Security accounts for about 40% to 43% of the benefit that the average person 65 years of age and older, not the benefit but the income that a person 65 years of age and older has coming in.

Tom Mosley:

Now, here’s the real kicker. When they started Social Security in 1935, there were 160 people paying in for every one person that was drawing out. I don’t want to call it a Ponzi scheme. So let me just tell you what it really is, it’s a Ponzi scheme. It’s always been that they’ve not kept all the money that was paid in for Social Security in the account, but people have been paying in, there’s been some money in there so that the people who are drawing out can have enough money. Well, it was a 160 to one.

Tom Mosley:

In 2022, that worker to earner from Social Security ratio is down to 2.2 to one. I often tell people, if you’ve got 2.2 grandkids or more, you need to thank them for your Social Security because they’re paying your Social Security. And they had to pay out 35 million in 1935 and now it’s over $1 trillion annually. The poverty rate during the depression in the ’30s was over 50% for seniors, now it’s a little bit less than 10%, still far more than it should.

Tom Mosley:

So, what are the options? What could we do? Social Security could go broke, but things we believe that will happen before it gets taken away. Now, sometimes they say the first two options will never completely or even come close to closing the gap on Social Security. The first option that’s talked about is let’s take the ultra high earners, that’s people who make over around $150,000 a year because right about $148,000, $149,000, $150,000, people stop paying FICA. You don’t pay any more FICA Social Security tax after that rank.

Tom Mosley:

Well, what they’re saying is people who are ultra high earners and make more than that, let’s just continue to take FICA out of their wages for as much as they earn. So Bill Gates, who earns maybe millions or billions whatever, Bill Gates would pay FICA on all of his earnings. Well, that sounds good and it would bring in more money but not nearly enough to pay for the gap. The other idea is take those ultra high earners and now, if you make over a certain amount of money, 34,000 as a single person, 44,000 as a married couple, you then have to start paying tax on Social Security and it reaches a maximum of where you pay tax at your rate on 85% of your Social Security that you earn.

Tom Mosley:

Well, what they’re saying is let’s take the ultra high income earners and let them pay 100% tax on all of the Social Security that they earn. Sounds like a good idea but it would bring in a minuscule amount of money compared to what’s really needed. So what’s the answer, Tom? Well, let me tell you a story. Chris Christie, the little Pillsbury dough boy from New Jersey, about eight or nine years ago, maybe seven years ago, in a presidential debate in New Hampshire said, to answer Social Security and to solve the problem said, “Why don’t we just raise the Social Security full retirement age to 70 over a period of time for people who were like 45 years of age and younger?”

Tom Mosley:

Well, he was on a college campus doing that debate and he got booed. And the other 15 Republican candidate said, “No, no, we don’t want to do that. That’s a terrible idea.” Actually, it’s the only one that’ll really work. Secondly, they’ve already done it twice before, and third, it will solve the income gap. All right? Delay Social Security full retirement age for future generations, say to 70. So, what would happen is instead of earning a full retirement at 66 or 67 the way people do now, you would wait to earn a full retirement age till age 70.

Tom Mosley:

Hey, well hold on. Remember when they first started? Most people didn’t live to 62 when they could first collect. So if people are living into their 80s and even 90s now, if we delayed Social Security to 70 and we moved it up over a period of years, we moved it up for the younger ages, it would make Social Security solvent. So what has to happen? Somebody has to have a backbone to bring this up to get it passed. They’ve already done it twice. When you first started getting Social Security in 1935, you could be 65 and get Social Security full retirement age. Then they moved it to 66. And if you were born in 1960 or later, now it’s 67. They just stopped moving the age up as people got older.

Tom Mosley:

That would solve Social Security and it would answer the question, could Social Security go broke? Yes, it could if no one has the backbone to deal with it. Hey, thanks for listening to this episode. If you like this episode, please share it with somebody. And if you want to get notification of future episodes, click the little Subscribe button and we’ll be back with you next week with another episode of the E.A.S.E Into Retirement Show.

 

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